Motherson Sumi Wiring slips 6% on margin disappointment in Q2

Shares of Motherson Sumi Wiring India (MSWIL) slipped 6 per cent to Rs 82.25 on the BSE in Tuesday’s intra-day trade, in an otherwise strong market, on profit booking after margin disappointment in September quarter (Q2FY23).

The company's reported earnings before interest, taxes, depreciation, and amortization (Ebitda) for the quarter stood at Rs 190 crore, up 2 per cent year-on-year (YoY). However, reported Ebitda margin was 10.4 per cent, down 290 bps YoY.

MSWIL said margin wasimpacted due to initial one-time startup costs of new programs at Bengaluru, and a new facility at Chennai. "To meet the increased volume, additional costs on expedited freight / extra ordinary manpower costs have been incurred, further aggravated by supply chain constraints," the company said.

Revenue during the quarter grew 31 per cent YoY at Rs 1,835 crore, while profit after tax increased 2 per cent YoY at Rs 116 crore over the previous year quarter.

The management said significant growth in business was seen on the back of strong capabilities, and long-standing customer relationships. The company also expanded capacities to meet enhanced requirements of customers. "Indian automotive industry is showing signs of revival, and our customers are also ramping up production. This has resulted in one-time costs which should be mitigated in the coming quarters," the management added.

ICICI Securities said MSWIL's performance, in terms of topline, was broadly on expected lines; however disappointment was witnessed on the margins front. Muted margin performance was on account of decline in gross margin which declined 130 bps QoQ & was further aggravated by employee expense which grew 90 bps QoQ.

"Part of rise in input costs is explained by initial ramp up costs involved as company commissioned new facilities in Bengaluru and Chennai resulting into additional manpower requirement while the other part is due to delay in passing the incremental costs incurred to customers. However, over the long term, we continue to like the stock given the tailwinds of increasing wiring harness content amidst electrification and increase in electronic content in vehicles and superlative return ratios profile (~50 per cent)," the brokerage firm said in a result note.

At 10:32 AM, MSWIL was trading 5.5 per cent lower at Rs 82.85, as compared to 0.85 per cent rise in the S&P BSE Sensex. In the past six months, it has outperformed the market by gaining 19 per cent, as against 7 per cent rise in the benchmark index. The stock had hit a record high of Rs 94 on September 9, 2022.